Friday, August 7, 2015

NAMA scandal

Since this blog last posted on the latest NAMA scandal a number of weeks ago, details are still emerging bit by bit and this scandal is now the focus of a criminal investigation and an Assembly inquiry.  

Readers of this blog will recall that the scandal surrounds the sale by NAMA of loans owned by debtors from across the north of Ireland who had borrowed from Anglo-Irish bank, AIB, Bank of Ireland which had  a par value of £4.5bn.

The sales process of this loan book was called, “Project Eagle”.  

NAMA sold the entire loan portfolio to US vulture capital fund, Cerberus. 

However, what has raised public concern is the allegation that these loans were sold to Cerberus for £1.5bn.

According to NAMA that was their market value at the time of sale. The loss to the taxpayer, was €280m.

One of the questions  of public concern is why did NAMA sell the loans as one lot? Why did they not wait until there was a rise in the northern property market and therefore the value of the assets, in order to get a better return?

The whole purpose of NAMA you will remember is to recoup the losses to the Irish taxpayer who are burdened with the toxic debt of the bank bailout at a cost of €64bn.

This in itself is unfair and unjust.

Sinn Féin is on the record in the Dáil as having raised our deep concerns about the sale of the “Project Eagle” loan book from the beginning.

Our Finance Spokesperson Pearse Doherty TD, questioned the Minister for Finance Michael Noonan, on whether or not NAMA had  received the best value for the portfolio.

Pearse stated, "Fire sales at the cusp of property price and economic recovery ring every alarm bell there is.” 
He asked the Minister about, “…the number of bidders; the date the bidding process commenced; if he instructed NAMA to dispose of their entire North of Ireland portfolio; the criteria used to establish the successful bidder; and if he will disclose the ultimate price paid for the portfolio.”

At the start of this month Independent TD Mick Wallace pulled no punches when he too raised similar and valid concerns in the Dáil.  He directed those at the Labour party leader and Tánaiste, Joan Burton. What he had to say has rightly give rise to much media commentary since. 
The Dáil Public Accounts Committee (PAC) then held a  hearing.  That took place on 9th July. 
The PAC called  NAMA Chairman Frank Daly and it’s CEO Brendan McDonagh to answer questions about these issues and to probe a series of related events of deepening public concern.
Frank Daly told the PAC committee that they first became aware of investor interest in the purchase of the North’s loan portfolio when Minister for Finance, Michael Noonan gave them a letter he had received from then DUP Minister for Finance, Sammy Wilson on 24 June 2013. 

In that letter Sammy Wilson stated, that he had already had discussions with some of those interested in purchasing the loans and that a law firm, Brown Rudnick, had been instrumental in introducing him to these potential investors.  
  Brown Rudnick wrote to Sammy Wilson with their proposal and he  passed it onto the Finance Minister, Michael Noonan in Dublin for consideration – and, on the exact same day that he received it, 24 June 2013. 

Normally takes at least 10 working days for correspondence to be considered and processed by Officials in any Department, before an advised response is forthcoming by Ministers.

Anyway, Brown Rudnick stated in that correspondence to Sammy Wilson that, “Two of our clients have each confirmed that they would, independently, be committed to a process of a potential outright purchase of the NAMA Northern Irish Borrowers Connections Loan Book…”

The letter went onto detail a series of conditions expected from their clients.  It also stated that, “The integrity of the transaction is our main concern.  Proceeding with one party on a limited exclusivity, will ensure a focused, expedient process with guaranteed confidentiality, which we would see as absolutely vital for such a process."

It was a full month later, on 25 July 2013 when Michael Noonan replied to Sammy Wilson.  

In his response Minister Noonan pointed out that parties interested in acquiring NAMA loans or assets should make direct contact with NAMA themselves.  He also said that NAMA's policy was that loan and asset sales should be openly marketed and they did not favour granting exclusive access to any potential purchaser as that would militate against achieving optimal value for the assets concerned.

A prudent response from Minister Noonan, right?

NAMA informed the PAC that in September 2013, Brown Rudnick law firm made an unsolicited approach to them to say that their client PIMCO was interested in acquiring NAMA's northern loan portfolio, but that they wanted a closed sale, rather than an open one. 

This is against NAMA policy.  So, NAMA engaged with PIMCO they say to try persuading them of an open market approach to the sale. 

In early December 2013, PIMCO did then make a bid, but still wanted a closed sale.  

A week later, the NAMA board met and decided that the loans would be openly marketed through competitive bidding and a minimum price reserve was agreed which they claim reflected the market value of the assets.  

A company called Lazard were appointed by NAMA on 8th January 2014 to oversee the sales process of the loans.

However, NAMA  then received what they described to the PAC as a “letter of intent” or Memorandum of Understanding.  This they said was sent from Peter Robinson through his private office in the Office of First and Deputy First Minister on 17 January 2014.

This letter related to the proposed management of the northern loan portfolio and according to NAMA, appeared to outline an agreement between PIMCO and the Executive in the North.

This was news to Martin McGuinness. As Deputy First Minister it did not have his  approval, consent or knowledge.

We now know that on 10 March 2014, PIMCO disclosed to NAMA that they had discovered that their proposed fee arrangement with Brown Rudnick law firm also included the payment of fees to Tughans solicitors, and to a former member of NAMA’s northern advisory committee, Frank Cushnahan who had resigned from that committee on 8 November 2013.

NAMA have stated that their board met the following day to consider the most appropriate course of action. 
PIMCO were then told to withdraw from the bidding process by NAMA due to their concerns about the proposed fee arrangement which PIMCO had disclosed to them.  

We now know from NAMA that this fee was £15m.

Under questioning from Sinn Féin TD Mary Lou McDonald at the PAC committee, NAMA Chairman Frank Daly confirmed that he had alerted Minister Michael Noonan of this serious development on 13 March, including the £15m fee arrangement and how it was to be divided up.

Mary Lou asked the NAMA chairman did the Minister at any stage have a conversation with him about suspending the entire sales process, given this irregularity.  

Frank Daly confirmed Minister Noonan had not.

This is not only astounding, but also ill-judged on the Minister’s part.

Surely, it was crystal clear that this entire sales process was now flawed and compromised.

It is alarming that Minister Michael Noonan and NAMA did not act to alert the Executive and relevant authorities in the North of this development and their concerns about such an important matter.

This failure is unacceptable and requires explanation from Minister Noonan.

Martin McGuinness has written to both Minister Noonan and An Taoiseach Enda Kenny to express his concerns after only becoming aware of these matters through the PAC hearing this month. 

We now know that Lazard had interest from nine bidders but that it was the US vulture capital fund, Cerberus who landed the deal. 
This sale was completed on 20 June 2014.

NAMA stated that given their concerns around the £15m fee arrangement disclosed by PIMCO, that they sought a declaration from Cerberus that nobody connected with NAMA, including any former member of an advisory committee, would be paid any fee, commission or other remuneration or payment in the Project Eagle sales process.

It has since been discovered that Cerberus did contract Brown Rudnick, who in turn used Tughans and that firms managing partner departed company after a dispute over £7m being diverted to an Isle of Man bank account. 

That issue is being investigated by the Law Society.

The final commercial deal between NAMA and Cerberus is not yet clear. Ditto whether there were “fixers” fees paid and if so, to whom exactly?

That issue is being investigated by the British National Crime Agency.

For Sinn Féin the core issues are whether the taxpayer got best value for money from the sale of Project Eagle in the South?

Why NAMA and the Minister for Finance Michael Noonan failed to abandon the sales process when PIMCO made such a serious disclosure about fixers and fee arrangements, and why they then failed to inform the Executive of these serious concerns?

All of this warrants independent examination in our view. This requires the establishment of a Commission of Investigation by the Irish Government.  
 To date the Minister for Finance has failed to even come before the Dáil and make a full statement on the matter.
However, Sinn Féin will table a Dáil private members motion at the first opportunity on all these issues.  
We are therefore putting the Government and Minister Noonan on notice.

In the North there also remain outstanding questions including public concern that there may have been unethical political influence as part of this broader NAMA scandal, as reported widely in the media.

All of these issues must be fully examined in an open and robust way, otherwise our political institutions risk being brought into disrepute. 

The Assembly Finance and Personnel Committee have agreed terms of reference and began their first, in a series of hearings at Stormont yesterday.  The Committee have now agreed to invite former DUP Finance Ministers Sammy Wilson and Simon Hamilton to appear before them.  

They should obviously appear without delay.

The role of Cerberus  cannot be ignored either. 

They must refrain from adding to any negative, downward impact on small businesses, employers and the wider economy through a “fire-sale” of assets.

There is rightly a high public expectation that those responsible for inspecting and considering these critical issues - whether  law enforcement agencies or Assembly scrutiny committees - will do so in a fair and robust way that ensures the public interest is put first.

We can be sure that this is the beginning rather than the end of this saga. There is no doubt that more will come to light y from both Dublin and Belfast - and perhaps further - in the time ahead.

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